Facebook to pay out $20m in 'sponsored stories' lawsuit

A United States judge has given final approval to a $20 million (£13m)
settlement in a class action lawsuit that charged Facebook with violating
users’ privacy by using their names and likenesses in its "sponsored
stories" advertising programme.

Facebook must pay out $20 million to settle a class-action suitPhoto: REUTERS

The ruling was issued on Monday in the US District Court for the Northern District of California. The settlement will see a payment of $15 (£9.68) distributed to each Facebook member who submitted a valid claim, with expenses such as administrative costs and lawyers’ fees to be paid through the settlement fund.

The settlement covers some 150 million Facebook members whose names and likenesses were allegedly misappropriated in connection with the "sponsored stories" programme. However, only the 614,000 users who responded to Facebook’s class action notice can make a claim to receive a cash payment.

"Although the monetary relief to each class member is relatively small and the percentage of class members who submitted claims is limited, the settlement as a whole provides fair, reasonable, and adequate relief to the class, in light of all the circumstances, including the low probability that a substantially better result would be obtained through continued litigation," said US District Judge Richard Seeborg in an official statement.

The ruling also requires Facebook to make changes to its Statement of Rights and Responsibilities to give users better information about, and control over, how their names and likenesses are used in connection with sponsored stories.

The suit was first filed in 2011 in response to Facebook’s “sponsored stories” advertisements, which effectively turn the act of pressing the Facebook “Like” button into a commercial endorsement.

If a Facebook user clicks the “Like” button for a product or service with a Facebook page, that user’s profile picture and name may be automatically used in advertisements for that product or service that appear in the their friends’ Facebook pages.

The suit, filed in April 2011, claimed Facebook did not adequately inform people of the “sponsored stories” feature or give them a way to opt out of the advertising programme.

"This is not just a damages action, but a groundbreaking digital-privacy rights case that could have wide and significant legal and business implications," said David Straite, formerly partner at Stewarts Law, (one of the firms leading the claim), at the time.

In a statement, a Facebook spokesperson said the company was "pleased" that the settlement had received final approval.

According to a recent study by Consumer Reports, an estimated 13 million Facebook users in the United States either do not use – or are unaware of – the site’s privacy controls. Additionally, 28 percent of the people the magazine polled said they share either all or almost all their Facebook posts with people beyond their “friends”.

Meanwhile, only 37 percent of users say they have used the site’s privacy tools to limit how much information apps are allowed to see.

“Facebook really is changing the way the world socially communicates and has become a successful service in part by leveraging copious amounts of personal data that can be spread far wider than its users might realise,” Jeff Fox, Consumer Reports technology editor, said at the time in a statement.

“Our investigation revealed some fascinating, and some disquieting trends – but ones always worth knowing for consumers who wish to keep their personal data under better control.”